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Sun 1 May 2011 01:12 PM

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Europe’s SAP warns of Arab Spring toll on profits

Software giant says political turmoil in Middle East could affect business over coming quarters

Europe’s SAP warns of Arab Spring toll on profits
Europe’s largest software maker said Arab unrest could pose a risk to earnings

Europe’s largest software maker, SAP AG, has warned that
civil unrest in the Middle East could “negatively impact” on the company’s
financial position.

The German vendor said revenues for the first quarter rose
21 percent to €3.02bn ($4.47bn), while net income increased 20 percent to €528bn.

However, the company stated that while the impact of
uprisings in the Middle East on business had so far been contained, this could
change in the coming months.

“It is very difficult to judge how the situation in the
region will develop,” SAP’s interim report read. “As a result we cannot make
any reliable judgments at this stage about the possible effects of these events
on our business. We cannot exclude the possibility that they may negatively
impact our financial position, cash flows, operating profit, and stock price.”

SAP has numerous high-value agreements to provide regional
organisations with its software. Notable examples in territories impacted by
the unrest include a bumper deal signed with the Libyan government in 2008 to
provide software to nine universities and two educational institutions, and a
five-year multimillion dollar agreement signed with Egypt’s
government-administered postal service in 2007.

Two months ago, SAP agreed a deal to standardise all of the
UAE’s Federal Electricity and Water Authority’s (FEWA) existing SAP software.

The company reported a 14 percent rise in quarterly earnings
for the EMEA market to €1.48bn.

Post-recession, SAP has enjoyed a rally of strong revenue
growth across the region, but said the so-called ‘Arab Spring’ protests “could
pose a risk to this recovery”.

SAP has suffered a couple of tumultuous years. During the
global economic crisis, the company’s revenues were battered as enterprises
reigned in their IT budgets. This led to the resignation of then CEO Leo
Apotheker and the installation of a co-CEO structure, headed up by Jim Hagemann
Snabe and Bill McDermott.

Since that decision, the company’s quarterly performances
have improved markedly, while continuing to be outstripped by those of its main
competitor, Silicon Valley-based Oracle Corp. Late last year, SAP lost a legal
battle with Oracle, which had accused the company of stealing its intellectual
property. A court ordered SAP to pay $1.3bn in damages, although the company is
the process of appeal.

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